Bitcoin and Bust?!

“Bitcoin” has become all the rage lately… well sort of as the market only just crossed $1 billion today in total market cap. This was set set up back in 2009 to create “anonymity” for movement and usage of your capital. I am a computer world dinosaur but here is how I see it. Basically this is just another “fiat” currency that travels the “ethernet” world. It is unregulated (for now), doesn’t have a “home office” to complain to if you have a problem and not “tangible” in any way shape or form. The “non tangible” aspect is one of the characteristics that the Bitcoiners tout the most, (I’m sorry but I don’t want what they’re smoking). You can only use it if someone else is willing to accept it (sound familiar?).

The problems that my little logical brain has are many, but in a nutshell, what is it if it is not a physical “something?” What happens when the government (or governments collectively) want to get involved or just decide that they don’t like it and make it illegal? …And my biggest problem? What happens when the internet goes down? Notice that I said “when” not “if?” There are laws on the books everywhere now that allow governments to simply take it over and shut it down within their borders. “Laws” are only put on the books with the INTENT to use and when the collapse arrives, the internet will (I am convinced) be regulated, censored and even shut down entirely. What then? How do you spend these digital, lighter than air, nonexistent “stores of value”? In the most recent case of Cyprus, would a baker or electric company or gas station accept a “Bitcoin” payment?

Conversely, could you make a purchase of say gasoline with “real” pieces of paper that have no value? Would that same gas station accept silver or gold as payment? And Bitcoin “ATMs?” What’s up with those? You can put your paper in …but but but not get anything out of them? Not to worry though, your “capital” is safe until, well, maybe when it’s not. Who knows? Maybe I’m wrong and we will all be using Bitcoins and traversing the “sky” highway and waving at George Jetson and his wife Judy as they pass by? Me, I would prefer to store value in “barbaric relics” especially if we move into a Mad Max stone age scenario which is a definite possibility when the financial sector comes down.

I wrote a week back that silver had a chance to put in an “outside day.” It was close but it did settle unchanged to down slightly. We have seen weakness of another $1 in price since then and gold is back again probing the trading lows. We know several things. Physical purchases around the world (amazingly including Americans) are very strong if not at record highs. We also know that the hedge fund community is the largest net short both silver and gold that they’ve ever been. Hedge funds are notorious as being a contrary leading indicator as they run in and out like lemmings with blindfolds. We also know that something big, maybe out of control and infectious has entered the banking sector with the Cyprus fiasco.

I would ask you this: If you pulled the curtain back and saw the world’s central bankers running around contradicting each other and in outright panic which would you do?
A. keep your savings in the banking system
B. set up a Bitcoin account
C. nothing, because the government won’t let anything bad happen
D. have some of/most of your wealth in a proven money that has lasted through all failures of all empires and been accepted as payment basically since the beginning of written history
It’s on sale now folks AND there is still availability! I suspect that availability will become a problem at some point this year… then price will not matter as the price of gasoline doesn’t matter to a stranded motorist!

2 Comments

Don Paul
on April 2, 2013 at 10:00 pm

Good Evening Sir:

Preface to what follows: If you don’t post all of my replies, or any of them, I won’t be offended in the slightest. Or, if you want to edit them, that’s all right by me too. Reading your missives (in affect listening to the voice of reason) and replying to them (which I can hardly refrain from doing) is one of my favorite pass times of each day… It helps me maintain my sanity in this crazy upside down world we find ourselves dealing with.

You kick off paragraph two with, “the problems that my little logical brain has are many…” YES! The problem is dealing in logic in what now seems to be a totally illogical world. The value of paper with ink on it, printed by a Government drowning in a sea of debt, the main function of which now seems to be to promise its citizens to pay them not to work, goes up in relationship to precious metals. Absurdities abound, and people with no sense of logic seem to be able to make sense of these absurditities? Perhaps they should give lessons as to how this works because I cannot grasp it at all. My, “little logical brain” concludes over and over that the world has gone STARK-RAVING-MAD.

Best regards,

Don

Bill Holter
on April 3, 2013 at 7:06 am

Exactly correct and indeed it has. I have needed “sanity checks” from time to time for more well than 10 years.

Upcoming Events

Meet Miles Franklin investment advisors, attend a Q & A session or join us at an upcoming conference.

There are no upcoming events.

]

Recent Posts

Experience Excellence

For 28 years the staff at Miles Franklin has delivered excellence in many ways – knowledge, relationships, product offers and customer service. They understand the macro/micro economics and geo–political advantages to investing in precious metals to protect your wealth. The team at Miles Franklin build life-long relationships because they custom-tailor solutions for investing in precious metals to meet each individual’s needs and circumstances. Our brokers have or can acquire most any type of precious metal from anywhere in the world. Each and every order is managed and monitored from start to finish. We are licensed, bonded, and carry an A+ BBB rating.